Be Sure To Join This Week’s Events
(Click the Zoom link at the noted date & time and we’ll see you then.)
Event 1: Coffee with Truvestments
In the world we are all living in, having a coffee together is tougher. Until we can, we are going to have a “Coffee over Zoom” just to chat, review and build confidence in the great future ahead – together.
Here is your stuff:
Date: Monday, September 28th, 2020
Time: 11:30am EST
CLICK LINK BELOW TO JOIN ZOOM MEETING:
Event 2: Conference Call Review:
“The Election Elephant”
No doubt this is on everyone’s mind. We will do our best help clear up concerns and shed light on history and how markets adapt.
Here is your stuff:
Date: Wednesday, September 30th, 2020
Time: 4:00pm EST
CLICK LINK BELOW TO JOIN ZOOM MEETING:
The latest in earnings data coming from Refintiv shows that analysts are starting their normal “hook” process. What is that? As we get a few weeks away from earnings season, you see analysts running scared and reductions in expectations are the rule. It’s why we see consistent “better than expected” results when the data are actuallyreleasedby the companies.
The “reduction window”typically lasts from now until October 10th-12th or so, and then once Q3 ’20 earnings start, we will all start to see upward pressure once again. Don’t stress – as covered before, thishappens every quarter: It’s the last week of the current quarter and then the first 10 days of the new quarter when analysts get nervous and don’t want to be tagged on a downside shock. This is good news by the way.
It is important to note that the normal “quarterly bump” comes next week. We’ll see this in the Friday, October 2nd release of Refinitiv’s data. That next bump should come in around $156.00+/- versus the current S&P 500 “forward 4-quarter estimate” this week of $146.27.
That’s about a $10 or 6.0% increase in the forward roll from Q3 ’20 to Q2 ’21, to Q4 ’20 through Q3 ’21. Recall that the July 1 estimate from June 30 this year was a larger 11.8% increase from $127.44 to $142.66 (and recall they were dramatically short). Expect them to be so again as margins and efficiencies are improving far more quickly than assumed.
Even as This Quietly Improves…
…fear remains deeply set in the psychology of the crowd. The good news is that it seems to even be increasing.
The images below suggest that chop and red ink over the next few weeks will continue to set an excellent foundation for the next leg up from here.
The theme of the data snapshots below is clear: there is very little bullishness left in the marketplace. And in some cases, we are hitting record fears.
To which I have one word for the file: fantastic
Ok – this first image above is the “Yale Crash Index.” They keep track of a number of different internal data points. Recall, that the blue line is a bit backwards in how it’s presented: Low readings mean that a low number of investors are not worried about a stock market crash.
- The lower the reading,the higher the concern is about an upcoming market crash.
- Conversely, higher readings suggest an increased level of investor complacency.
The August 2020 survey results were published within the last week, and they showed yet another increase in crash concerns for both institutional and individual investors. This time the Crash Confidence indicator dipped to just 13.1 for individual investors, which is even lower than the prior record low seen in April 2009 immediately after the Financial Crisis market lows were put in…indeed it’s a 20-year record low.
As shown in the image below, while the prior record low Crash Confidence reading in April 2009 came after the S&P 500 had fallen 50% from its 2007 highs, the current record low reading comes as the S&P 500 has recently made new all-time highs while in the midst of a global pandemic.
Let’s take on more perspective on this. The next image below is the same as above only the blue line is inverted. Notice that the Crash Confidence results show that these are critical points – for lows…at least for the last 20 years.
So, the data are clear: investors are spooked. The good news is that they are spooked to levels seen at times when historically, very important lows are being formed.
Timers and Newsletter Writers
It’s always good when the sentiment issues are matching in different crowds and perspectives. In this case, the next image will show you how short-term timers and newsletter writers feel about the market.
…read ’em and reap:
As you can see – newsletter sentiment and timers perspectives have now entered the extremely bearish zone. In fact, the combination of various directions to readers is now a combined short reading. The level below zero is the amount the collective body of newsletter writers believe their subscribers should be short the market – in percentage terms.
Every single other reading at this level (or a tad bit lower) marked important lows when viewed in the rearview mirror.
Another 2-3 weeks of chop and you should see all of the sentiment readings, AAII, Yale Crash Confidence, Mutual Fund cash (NAAIM) and the Newsletter timers nearly perfectly aligned to mark a very important low.
There won’t be a perfect day to act – but suffice it to say thatsurvey results like the weeklyAAIIinvestor sentiment reading and Yale’s Crash Confidence index suggest that the market is still climbing the “wall of worry” all long-term investors prefer to see.
With stock market crash concerns are at their most elevated levels of at least the last 20 years, it suggests that an actual crash is not very likely. From a contrarian perspective, high levels of concern for a looming crash make us even more bullishon forward returns and upside surprises.
It is our job to withstand the assured storms ahead and be disciplined in our planning for clients’ goals.
It is imperative one remains patient during the quiet times. Sure, more choppy waters are likely as the election approaches. Sure, media will do its’ best to knock you off your focus, grabbing at your fears and taking you off your pathway.
Rise above that tension and pull your seatbelt tighter. The game is just beginning. The pitchers are about warmed up and the stretching in the outfield is almost complete.
Make sure you have extra popcorn and beverages, I smell a lengthy, extra-inning game approaching.